Segmentation Strategies

Using our limited resources wisely

• Mass market approach• Large segment approach• Adjacent segment approach• Multisegment approach• Small segment approach• Niche approach•Mass customization approach

Segmentation Strategies

Mass Market Approach: a genericvalue proposition built around the corecustomer need and the business’sgeneric positioning strategy

Use when:

•differences in customer needs are small

Segmentation Strategies

“Large Segment” Approach: addressone set of core customer needs

Use when:

•resources are limited•advantage: benefits of segmentationwhile providing a relatively largemarket demand

Segmentation Strategies

“Adjacent Segment” Approach: moveinto the next most attractive segment

Use when:

•growth is desired but•resources are limited

•advantage: use profits from primarysegment to move into closelyrelated segment

Segmentation Strategies

“Multisegment” Approach: multiple market-based strategy where several segments aretargeted, each with its own marketing mix

Use when:

•growth is desired butresources are limited

•advantage: tailor our efforts toward mostattractive segments•improve efficiencies•portfolio effect

Segmentation Strategies

“Small Segment” Approach: focus on the smallestsegment

Use when:

•resources are limited, specialized capabilities•small segments are ignored by competitorspursuing mass market or large segment strategies

Segmentation Strategies

“Niche” Approach: focus on a portion of the smallest segment

Use when:•some needs cannot be fully addressed within a single segment

Segmentation Strategies

“Mass Customization” Approach: complete opposite of mass market strategy; each unique group of customer needs is a niche

Use when:•database marketing allows customization within each segment

•combines the advantages of niche segment strategy with the breadth of opportunity available in a multisegment strategy•customers create their own segments

•Disadvantages:•increased price of customized products•delay in receipt of custom-made products•need for customers to invest time in specifying their preferences before the product can be produced

So…

• Each segmentation strategy has its own merits and limitations

• Segmentation is the first step in Customer Relationship Management

• Demographics alone seldom provide much guidance for product development or message strategies – we need to group people on the basis of similar needs